Jan 3, 2013

Direct Cash Transfer Scheme: Pros and Cons

The much awaited scheme of Congress-led United Progressive Alliance (UPA) government, Direct Benefits Transfers Scheme has been kicked off in 20 districts in India on Tuesday.

The number of districts has been reduced to 20 considering the difficulty in implementing the project, which demands high banking infrastructure and bank, Adhar cards of beneficiaries.

There will no change in the schemes for the direct cash transfer; rather there will be change in the method of payment to beneficiaries.

As a pilot project, the schemes like pension, scholarship and rural employment guarantee scheme beneficiaries having bank, Adhar cards will get direct cash transfer to their respective bank accounts.

The scheme has been criticised by various political parties including the opposition Bharatiya Janata Party, terming a scheme to lure voters and to get mileage in the 2014 general election.

The big question rises, is the scheme of direct cash transfer launched in hurry? Since, most of the villages even lack banks and beneficiaries have no bank account, how the cash to be transferred and in what time it is going to achieve the complete set up.

For the current fiscal year, the government to pay the subsidies of around 1.8 lack crore for food, fertizer and fuel subsidies. The number of subsidies beneficiaries may be high in number count.

In practically, it is very hard to have that much infrastructure and administration to cop up with the proper implementation of the cash direct transfer scheme.

The major drawback would be the implementation of the direct cash transfer in the mega schemes related to food, fertilizer and fuel.

Food Subsidies

The implementation of direct cash transfer scheme in food subsidies seems very tough, keeping the clear view of the current Public Distribution System (PDS). Where beneficiaries or buyers need to pay the full price of the goods and then they would get their subsidy in form money into their bank accounts from the government.

Subsidies on Fertilizers

In move to help farmer, the subsidies on fertilizers helping farmers a lot. Once the scheme of direct cash transfer is being implemented for fertilizer subsidies, the farmers might need to pay the exact price of the fertilizer and then to get their subsidies into their accounts.

Fuel Subsidies

The implementation of direct cash transfer scheme in fuel subsidies would be a big challenge for the government. The cap on use of LPG gases for year has been criticised by the various political parties, as the people have been getting the privilege from many years. Similarly, household to pay the market price of the LPG gas cylinder and then to get the subsidies to their bank account. And it would be more difficult for the government to deal with Petrol and diesel price on subsidies rate, as commuters purchase and use.

The advantages of the direct cash transfer are it will check the middle man, corruption and wastage of time of beneficiaries. And on the flip side, it involves less transparency, big hurdle in handling bulk transfers, arranging a big infrastructure of banking and Adhar cards sound most impossible.